Sanderson CEO Says Food-Service Demand May Be in Recovery

Sanderson Farms Inc., the fourth-largest U.S. chicken producer, said rising prices for boneless, skinless breast meat indicate that demand from U.S. food service may have bottomed in recent months.

“What we’ve seen in November, December and January is hopeful,” Joe Sanderson Jr., chief executive officer of the Laurel, Mississippi-based chicken processor, said in a telephone interview today. “We have to see it a little longer before we can say things are improving.”

About 40 percent of Sanderson’s sales come from food-service customers including restaurants such as Chili’s, On the Border and Arby’s, he said. Customers have told him that while business is still “soft” it is “no worse,” Sanderson said. Chicken demand also accelerated during the fourth quarter as food-service operators featured poultry over other meats, according to a Jan. 14 report by BB&T Capital Markets.

Prices for boneless, skinless breast meat, a staple of the American diet, didn’t drop in November and December and the usual seasonal gain in the market this month occurred as forecasts called for more chicken, Sanderson said. U.S. broiler chicken production will be 36.4 billion pounds in 2013, up from a December forecast for 36.1 billion pounds and less than half a percent below a year earlier, the Department of Agriculture said on Jan. 11.

Sanderson plans to reduce its production 1.1 percent for the fiscal year through October to about 2.93 billion pounds, the company said in December.

Improving Economy

“Restaurant demand is picking up,” Joe Grendys, chief executive officer of chicken producer Koch Foods Inc., said in a telephone interview today.

The price for boneless, skinless breast meat today is about $1.44 a pound, up 4.3 percent from a year earlier, according to Urner Barry, an industry research company. The price of wings also has risen to a record and may climb more leading up to the Super Bowl in February, Sanderson said while declining to provide a forecast.

Incrementally lower U.S. unemployment, which dropped to 7.8 percent last month from 8.5 percent a year ago, is helping stabilize restaurant traffic and a resolution to the debt-ceiling debate in Washington may help further, Sanderson said.

The debt ceiling debate in August 2011 “put a damper on the U.S. economy and consumer spending,” he said.

Sanderson said he is also watching the moisture in the U.S. midwest as farmers prepare to plant corn and soybeans in a few months and looking for the South American harvest to ease demand on U.S. crops.

Tyson Foods Inc. was the largest U.S. chicken processor in 2011, followed by JBS SA’s Pilgrim’s Pride Corp. unit and closely held Perdue Inc., Tyson said on its website citing industry publication Watt Poultry USA.

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